FCA - Top 3 Questions and Answers

Published: Tue, 05/03/22

FreeChurchAccounting.com

Accounting for Churches and Nonprofits

May 2022 Edition

Sharing the top 3 questions that I am asked by new clients:

1. Can we reimburse our Pastor for his meals?

That depends =)

Almost all churches and nonprofits have an expense account titled "Pastoral Meals", "Meals/Entertainment" (by the way...if you are using this account title...you might want to change it to something like "Meeting Meals" because of the tax laws making some entertainment expenses taxable to the employee), "Travel Meals", or something similar.

That is not money set aside for the Pastor or Director to eat lunch on everyday...or at least it shouldn't be.

It should be a "church" (business) expense and there are some things that MUST be in place for your organization to lawfully and properly reimburse or pay for those meals. Click "Read More" below and scroll to the bottom of the article for more important details...

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2. Taxable Gift?

I get this question in one form or another almost every month ...

Client's question, "We brought someone in to help lead worship for a conference. He doesn’t really have a ministry, but we wanted to bless him for his time and service. Would you classify the amount we gave him as a love gift and not taxable to him?"

My reply, "Because he performed a service for the love offering ...the IRS will require you to file and send him a 1099-NEC...if you gave him $600 or more "collectively in a calendar year".

Client's reply, "Just to clarify, he didn’t require any payment/gift, but the spirit of it was we gave it response to his service. We also gave an offering to a preacher, and our gift was in response to his preaching at our church (although he too required no fee/offering). Will he need a 1099 since our gift was in response to his service?"

My reply, "You will be required to send 1099s to both of them (if love gifts were at least $600) as both "gifts" were for a "SERVICE" performed for the church.

NOTE: ALL churches/nonprofits are required to obtain a completed and signed W-9 from anyone that they give a love offering to ... if some kind of service was performed for the "gift" such as a guest minister or musician, etc. (EVEN if they do not expect to pay them much!) They can mark if they are an individual, corporation, etc. (you are not required to process 1099-NECs for corporations and nonprofits).

Click on the "Read More" below for more on the taxability of love gifts...

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3. How do I account for online donations?

If you are tracking donor/donations with your accounting software, you have to make sure your donor gets credit for their full donation...even if your online giving processor withholds processing fees BEFORE they deposit the net proceeds.

In Aplos, the process is simplified. That software has a place to enter processing fees and the software automatically gives full credit to the donor and subtracts the fees and shows the net deposits in the accounting register.

However, there is a process you must follow if you are tracking donor/donations in QuickBooks Online or something similar.

Click "Read More" below and scroll to the bottom of the page (above the Comment section on that page) for more details...

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